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FXstreet.com (Barcelona) - Rabobank's Jane Foley notices that the news from the Greek election results might ease risk aversion but that it is far from solving Europe's structural problems. Even in Greece, the newly elected pro-bailout parties still wish to renegotiate the terms of the EU aid. It is far from clear whether Greece will meet its obligations. Foley says that "Greece certainly is not the only source of fear. The fact that Spanish yields are back above 7% today is mostly the result of uncertainties connected with the combined debts of the Spanish sovereign, the regions and the nation's banking sector. This morning the Bank of Spain has reported April bad loans at 8.72% of the total from 8.37% in March. The growth rate of bad loans is increasingly and this will question the degree of re-capitalisation that the banking sector will require over the next 2 years or so. Last week's news of a EUR100 bln buffer for Spanish banks could conceivably prove to be insufficient."

Foley adds that "the higher Spanish yields go, the higher the risk of this occurrence. Not only that but as tensions remain at heightened levels through the system, the chances that Ireland and Portugal may not be able to return to the market when planned also rise; suggesting that further bail-outs could be needed for these governments… The G-20 will reportedly discuss raising the size of the IMF bailout fund at this week's meeting, but this news may not be sufficient to prevent money flowing out of Spain. Given that EUR/USD has risen over 3% from its June low, we remain sellers on rallies for EUR/USD for now."

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